The Effect of ERP System Implementations on the Usefulness of Accounting Information
Joseph F. Brazel
North Carolina State University - Poole College of Management - Department of Accounting
Oregon State University - Department of Accounting, Finance, and Information Management
ERP systems have become the system of choice for the majority of publicly traded companies and have radically changed the way accounting information is processed, analyzed, audited, and disseminated. In this study, we examine whether ERP system implementations have impacted the decision usefulness of accounting information. We find that ERP adoptions lead to a trade-off between increased information relevancy and decreased information reliability for external users of financial statements. After implementing the system, firms concurrently experience both a decrease in reporting lag and an increase in the level of discretionary accruals. Contrary to expectations, adopting more ERP modules did not augment these effects. These results should be of interest to financial statement preparers initially adopting or implementing new versions of ERP applications, auditors serving clients with ERP systems, and regulators overseeing the financial markets and consolidation in the ERP industry.
Number of Pages in PDF File: 37
Keywords: ERP systems, discretionary accruals, implementation, reporting lag
JEL Classification: M41, M43, M49working papers series
Date posted: October 4, 2005
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